Airlines Seeing War Impacts

Emphasizing support for the President and the national resolve of the nation to free Iraq, the Air Transport Association (ATA) today reported that the war effort is taking a heavy toll on demand for air travel. Systemwide drops in traffic—from already depressed pre-war levels—have forced carriers to make additional capacity cuts and eliminate more than 10,000 jobs in the first week of the war.
“As we outlined just a few weeks ago, the airline industry is in a seriously weakened state and now is beginning to buckle from the non-market blow being dealt by the war,” said ATA President and CEO James C. May. “The airlines have been making the tough decisions necessary to cut costs, to cope with existing market conditions. But the war in Iraq, combined with domestic terrorism threats that keep the nation at Code Orange high alert, are non-market forces putting extraordinary negative pressure on demand.”
In the week preceding the war, traffic moderated slightly. Following the March 16 Azores Summit, however, demand dropped at a pace not seen since the aftermath of the Sept. 11 attacks. Traffic for the week ended March 23 fell 10 percent, led by a 25 percent drop in the Atlantic, a 13 percent drop in the Pacific, and an 8 percent drop in Latin markets. Domestic traffic also fell 7 percent.
Advance bookings for the next 60 to 90 days suggest no relief in sight. Domestic bookings are down more than 20 percent, Atlantic down more than 40 percent, Latin off more than 15 percent and Pacific more than 30 percent. Airlines have reported that on some days cancellations are exceeding bookings.
Two weeks ago, ATA in its report, Airlines in Crisis: The Perfect Economic Storm, outlined the impacts a war would have on the airline industry, projecting traffic would drop 15 percent during the quarter in which fighting occurs. Data collected thus far are consistent with those projections.
“If this were a hurricane, the federal government would have declared a state of emergency and called out FEMA,” May added. “This war is an extraordinary, non-market condition that has combined with the airlines already weakened state to truly result in the perfect economic storm. Regrettably, our predictions of massive job losses and revenue are proving to be all too accurate.”
ATA has projected in its report that the war would trigger a total of 70,000 layoffs and the elimination of 2,200 daily flights in 2003. Just since the war began, carriers have announced additional systemwide capacity cuts of 6 to 12 percent and job cuts in excess of 10,000. In addition, Hawaiian Airlines declared bankruptcy since the war began, brining the total number of airlines under Chapter 11 bankruptcy protection to three. This week’s job cuts, flight reductions and additional bankruptcies also are in line with the ATA report.
“It is imperative that Congress offer specific relief for the economic consequences of the war. The airlines are not seeking a bailout or protection from normal market forces. On the contrary, we are seeking mitigation of the damage being done by the non-market impacts from the war.”
The Air Transport Association of America, Inc. is the trade association for leading U.S. airlines. ATA members transport 95 percent of all the passenger and cargo traffic in the United States.